If a candidate's campaign owes more money than it has on hand, and then drops out of the race before it can raise enough cash to cover the debts, what happens?

Good question. Didn’t that happen with Dennis Kucinich too? I know he tried to pay it off; not sure on the outcome. I wonder how common this is?

This is a great question. I did a little research and found nothing.

Campaigns in this situation have a few options. If they run for office again in the future, they can use money raised in the new campaign to retire old debt. This would probably be the case for Mrs. Clinton, since she can start raising money for her 2012 senate run immediately upon dropping out of the presidential race.

Second, sometimes the national parties, as well as the corresponding congressional committees can help retire debt for individual candidates.

Finally, and least appealingly, the candidate him or herself can borrow against their own assets and lend the campaign the money to retire the campaign’s debt. Then the campaign only “owes” the candidate. At that point, the candidate can use future runs for any office as a conduit for paying him or herself back.

@michael- very well written answer, in my political science class we went over this, Mrs. Clinton lent her campaign upwards of 5 million dollars. The only way to get this back is through fundraising. Also, a sidenote, a candidate cannot use this lending as a tax exemption since it is to their own campaign

One other thing I’ve heard of, if a candidate was recruited to run by the party, often part of their incentive is to have the party body (DCCC, RNCC, etc) cover some expenses, either directly or through friendly donors or PACs. That way, the candidate faces limited risk if the campaign goes badly.

Also, other candidates sometimes help. A notable example this year was McCain aiding Giuliani’s debt.

That is why Cain suspended his candidacy instead of withdrawing from the race outright. He can still raise money to cover his expenses and debts without getting into trouble with the campaign finance rules.